Many California legislators seem to believe in open borders — not just the border to Mexico but also the borders to Arizona, Nevada, and Oregon. Businesses are slipping out of state through those boundaries at an alarming rate because of the difficult conditions lawmakers have forced on them.
And it seems as if they don’t care.
Earlier this year, relocation specialist Joe Vranich released a 623-page report — “It’s Time for Companies to Leave California’s Toxic Business Climate” — which documented 2,183 “California disinvestment events” from 2008 to 2016.
“But it’s really worse than that,” we said at the time. Because, according to Vranich, “experts in site selection generally agree that at least five events fail to become public knowledge for every one that does.” A more accurate count, therefore, is about 13,000 disinvestment events over that period.
Then Vranich, who moved his business from Irvine to Pennsylvania, where he can more freely carry on his commercial enterprise, recently told us that “in just the last three months I’ve discovered another 32 companies disinvesting in California. In some instances, companies moved multiple facilities out of state, so the number of events is higher at 39.”
A particularly damaging loss that Vranich hasn’t counted yet because the company’s decision wasn’t announced until late June is Mitsubishi’s relocation of its North American headquarters from Cypress, where it had been since 1988, to Nashville, Tennessee, “joining a migration of Japanese automakers that have exited the Golden State for lower-cost Southern states,” says the Orange County Register. While the company wanted to be closer to Nissan and Renault, its partners which are both in Tennessee, the move was motivated by “cost savings through the business-friendly work environment” in the state.
So, the flight to freedom continues.
California’s economy isn’t based on the East German model, but neither is it an economy that works for consumers and businesses. In fact, it’s quite hostile to the latter, meaning that it’s more than a little unkind to the former.
To understand why businesses are fleeing, look at the comments from business executives who refuse to relocate in or expand to California.
- California “is a tough spot because of all the regulations and red tape. There are so many fees associated with having a business in California for which we didn’t get anything in return.”
- “The infrastructure is horrible, and the cost of travel is higher than any other state.”
- “Workers comp requirements are high. Insurance liability is way too high.”
- “Every single thing you can imagine. The red tape and bureaucracy.”
There are also serious quality-of-life issues. Companies don’t want their employees to have to struggle with the state’s crippling housing costs, unimaginable traffic, battered roads, man-made drought, and Third World conditions in the state’s two biggest cities.
Those refusing to take the business exodus seriously argue that a few departures won’t hurt California because it’s a big and will always have Silicon Valley anyway. Big Tech won’t flee, goes the narrative, because the industry and the state are a perfect match. Yet Vranich tells us that Cupertino-based Apple is among additional the disinvestment events he’s recently learned about. One of tech’s heaviest hitters, he says, has “selected Austin, Texas as the location for its new $1 billion, 133-acre corporate campus that will create up to 5,000 new jobs in the short term and add up to 15,000 once the site is built out. The campus expands the Apple footprint in Austin, already its biggest corporate presence outside of Cupertino.”
No other state treats businesses as roughly as California does. Taxes are onerous, regulations an anchor, economic freedom a fiction, and the legal landscape a snake pit. Chief Executive Magazine has ranked California the worst state in which to do business for 14 straight years.
Maybe the magazine just likes to pick on California. Or maybe, after so many years, it’s on to something. That puts it way ahead of the state’s nothing-to-see-here political class, which seems to be living in a world far removed from reality.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.